Major economic indicators weakens further

Rising inflation close to double-digit mark, rising Balance of Payment (BOP) deficit and squeezing foreign currency reserve have emerged as a deadly trinity, further widening the cracks seen in the economy. Nepal Rastra Bank´s four-month report released on Thursday indicates that the government´s aim to limit this year´s inflation to 7.5 percent seems increasingly challenging, as the inflation level inched further to 9.9 percent in the fourth month of the current fiscal year, higher than 9.3 percent in the first quarter.

A whopping rise of 16.4 percent in the prices of food and beverage compared to a nominal rise of 2.2 percent rise in non-food items fueled the inflation upward, states the press release issued by the central bank. Likewise, BOP deficit further spouted to Rs 20.49 billion compared to whopping surplus of Rs 41.28 billion recorded in the same period last year. The plunge in remittance income -- that has been the backbone of national economy for the last many years - by 6.6 percent has emerged as one of the major issues of concern.

Similarly, trade deficit, the different between imports and exports, also swelled by Rs 48 percent to Rs 98.97 billion. Trade deficit in the same period last year was Rs 66.86 billion. A 23.7 percent decline in exports mismatched with the whopping rise of 27.8 percent in imports, resulting to such an alarming rise in the trade deficit, said the central bank.

Among the major imports from overseas, gold remained the top with total value standing at Rs 19.25 billion, which was 168 percent higher than the imports that Nepal made during the same period last year. However, oil imports declined by 21.3 percent to Rs 12 billion, thanks to decline in international oil prices.

In the exports front, the figures are much more pessimistic as the exports to India that contributes over 60 percent of country´s total exports declined by 19 percent to Rs 12.19 billion. Even more disturbing is the shocking 30 percent decline in overseas exports. Nepal´s two major export pillars -- readymade garments and woolen carpet -- recorded yet another decline of 25 percent and 38 percent respectively during the period.

During the period, the central bank purchased Indian Currency (IC) worth $710 million, which is higher than $490 million that it had spent to purchase IC in the same period last year to mainly finance Nepal´s huge imports from India.

As a result of slowing growth rate of remittance along with creeping deficit in the BOP, the overall foreign currency reserve, during the first four months of the current fiscal year, squeezed by 11.1 percent to Rs 248.89 billion. The amount is sufficient to finance imports of merchandise and service for 7.3 months, the NRB release added.
Source:Republica